Covid issues have impacted me very badly and as you know am not in Sri Lanka and unable to return also. Hence, I really do not have a lot of time to spend to research and write very long posts like I used to which takes me multi hours and so much effort. Its easy to write few lines on Social medial on shares I hold only, hoping you"ll too will buy the same to create price momentums. But you know when I post I do not throw out Sardines to Sea Gulls. When I write, I write in greater educational detail so you can decide for yourself. It take me lot of effort and time to write such posts which are most times no benefit for me . 90% of shares I comment to help others, over the years, I would not have held even.
Just food for thought that this page is different to so many
Anyway, to do a very indepth Budget Share analysis, I have no time. But I will touch on somethings/shares as far as I can.
1) LMF - A share with future potential ( not a short trade but Investment)
I really should have written on LMF when it was trading cheaper at around Rs 110. I did make short comment on a forum but nothing in detail . You know how I like to make posts on shares when no one talks about about them at rock bottom.
Those who read this page and forums would know , how I commented on CIC at Rs 50, CIND at Rs30 , RWSL ar Rs1.9. RIL at Rs 4.5, RCL / LWL at Rs 55 , DIPD at Rs 80 etc etc when no one talked about them.
But anycase, as I still see there is significant upside potential for LMF for a Patient Investor ( not an anna panna guy) am writing on it at Rs 130 in some greater details.
LMF and Budget :
* LMF is a share that will have direct benefit from Budget incentives in time to come. Government is taking measures to grow the local dairy production. SUN/WATA/LLMP can benefit too , but I see LMF is the key potential share in this regard.
* LMF has already undertaken a new project to double the milk
production and is expected to be completed by end of 1Q 2021. This project will consist of 4 large Cow Sheds which can hold 500 cows each.
* Budget proposed, Agri and livestock farming to be exempted from tax for 5 years. Technically , LMF should fall into that category. They should save 14% tax rate per quarter/year.
* Budget also talks about allowing deprecation in 2 years of the capital investments done on latest technology to collect local liquid milk in collaboration with local dairy farmers, enhancements to milk related productions and promotion of liquid milk. This will benefit LMF directly.
* Budget also talks about strategic investment tax concessions for a period of 5 years for capital investments of over USD 25 million with the view of facilitating companies to process milk powder exports. I don't know whether they will backdate/prorate this to help LMF, but as mentioned above LMF has already undertaken a big project to double its capacity. So not sure this will help LMF unless they undertake another massive project in the future.
* LMF is the owning company of LAKSPRAY , AMBEWALA Dairy product range, DAILY milk , My Juicy Fruit drinks etc.
* Note : Sri Lanka is one of the few countries still to rely on Milk power instead of Liquid Milk. This is not actually good thing. In many developed nations, finding powered milk is a challenge itself. Also during the manufacturing process of powered milk, some benefits/nutrients of liquid milk gets lost .
* Anyway, LMF is a key player to improve the liquid milk production in SL. I already see their Revenue on liquid milk for last 6 months has improved to Rs 2.718 Bil from Rs 2.260 Bil last year. With the new capacity increase we can expect much more revenue in the future.
*United Dairies Lanka (Private) Limited, a company under LMF is still under construction which falls under livestock farming budget benefits.
* A very interesting fact is, a Milk food company also hold a big amount of MELS ( Melstacorp shares) and also some booze shares (DIST) .
* LMF in last 2 quarters have reported Rs 6.28 eps. This is a big recovery from Rs 0.13 eps YOY.
* They are on due course to report their best earnings ( ever) .
* LMF asset value is at Rs 230 ( trading at Rs 130 now). So there is
good margin for improvement in that aspect too.
* I calculated. For every Rs 1 MELS will move up in market price LMF will gain ( or lose in reverse) , Rs 3.5 to their asset value. THIS IS BIG for LMF. If MELS moves Rs 10 up more ( when ever, thats a Rs 35 for LMF NAV ! )
* 2020 was bad FY for LMF as assets dropped due to MELS/DIST holding dropping in value due to market crashes. Now it will gradually pick up with time with any hopeful MELS price gains. DIST can have some negative tax from budget , but LMFs, DIST holding is nothing compared to MELS amount.
* In the report, they show a significant ( Rs 700 million) loss on "Elimination". I need to figure what this is for . Going forward if they can solve this elimination issue, that will be a massive increase in profit for LMF.
Like poultry sector, any animal based shares are prone to disease risk. In 2019, "Foot and mouth disease" affected Sri Lanka Milk industry a lot. So this is a risk management LMF/WATA/SUN has to take into consideration.
I can write more, but I think I gave enough details on LMF.
Poultry shares ( BFL, TAFL, GRAN) too will get Tax benefit.
Before I start, a word on poultry shares:
* Those of you who know me, will remember how much I warned against BFL some year ago ( and other poultry shares) when it was trading at Rs 220+ , near the top and a Hot herd run share. Sadly when I tried to show the other side for academic reasons, and tell public to be careful, some people got upset with me not understanding what I was trying to say. With time my warning came true as these shares dropped over 50-60% in price and BFL still down significantly from top.
* I also said when GRAN and TAFL was trading at Rs 50 / 80s it was good buy.
*I will write against shares when they are herd pushed or overvalued. I will talk positively when no one talks about them or are undervalued.
* By May 2020, these shares dropped to very low amounts much as 50-60% from last top ( Rs 245+). But on the positive side, I see poultry is pick up its earnings again.
* But also note, some share prices ( TAFL and GRAN) have doubled already to account for this improvement in earnings. So be aware of such too.
* I still see some potential for it to go a bit more on the positive side. But as a becareful note, not to expect the sky on these shares. Remember like Plantations , poultry sector has lot of risk and cost / government control issues. So if interested in these , go after them with moderate view so you will not be disappointed.
* A Negative. As much as Tax benefits sector gets as positive, I think I saw an issue that might have some negative impact on feed costs. I believe there is going to be government guaranteed buying price for Maize /Corn going forward. This can increase costs for poultry feed.
* Note, in summary, it is one thing to buy GRAN early at Rs 50 to hold still vs buy now at Rs 100 expecting it to hit Rs 200. I hope you see the difference and the point.
Also as side note . I don't like to talk too much about shares that are Directly dealing with animal killings ( as I don't like to promote such ) or any other share that causes social harm. But , it does not mean I will ask you not to trade or not talk about such shares. Don't worry . That why I am still making this post on poultry for anyone interested in such and for knowledge sake . Some prefer to avoid it . Some prefer to follow it. Everybody have to coexist. I just don't like mass promotions people often do on this sector as it is easy to push these shares due to illiquidity and dump on others. Then price drops like Rs 500 to Rs 70 can happen ( Yes BFL was near Rs500 one time.)
CIC , RAL , TESS
*As I talked about CIC at Rs 50, when zero people talked about it anywhere, and CIC is now Rs 140, I will not write more. But CIC is involved in Agri and Poultry. So they will benefit from Budget incentives.
* But there is difference of CIC at Rs 50 when I mentioned it, and buying now at Rs 140 expecting the moon.
* RAL will benefit from budget incentives too. At around Rs 5 RAL price is fair value compared to other manipulated shares.
* Also keep an eye on KZOO as it is a small share trading at still good price.
* TESS is getting budget tax benefit. But it is one of the most useless shares at CSE. To get tax benefit they first have to earn money. They had so much opportunity and incentives over the last decade to expand revenue and profit. All I see is , it is badly managed company as of now. This is STRICTLY A TRADING SHARE NOW. Don't chase and buy high.
UML, RIL and Motor Sector :
* UML will get direct incentives from Budget as they are manufacturing vehicles locally.
* I also see under very difficult circumstances, UML has reported Rs 4+ last quarter.
* I saw some people I know talk about DIMO. At Rs 350 or so , it was a good call. But as the vehicle imports are still an issue and budget has no big incentive for Motor sector ( other than UML), I would like to watch DIMO for December quarter too to see whether they can report good eps ( Agri equipment sales helped DIMO last quarter). DIMO is undervalued still at Rs 430 or so. But unless you don't mind holding for 1 year atleast , UML is a vetter pick than DIMO in the sector.
* When/if UML moves , RIL will get benefit. RIL hold 50%+ of UML and will get 50% of their profits too. So it okay to keep an eye on RIL for trading. RIL is also not too bad as its asset value is Rs 20+ .
* Btw, UML is usually a good dividend paying company too. I am holding a bit of UML possibly for trading as I think it can gain in price a bit more ( not as much quantity as some of you rich folks here).
CIND will benefit from Budget projects.
I talked about CIND in great detail from Rs 30. I predicted all this then. I have a whole thread on it at the forum. Now at Rs 90 I will not talk about it as I have done my bit to the community to talk about CIND future when no one did at 1/3d the price.
Now everyone is crazy about it. Maybe time to take rest CIND.
CTC, DIST, Telecom sector shares ( SLTL and DIAL) will have some negative effect from a Budget special tax ( to be clarified later)
Remember how much I talked about not chasing and overvaluing certain Plantation sector shares. Ex KOTA, MADU,BALA, MASK, LDEV etc. Even during these good times see the losses they have made. Budget is going to bring back that Rs 1000 wage for workers I mentioned in the pas post. It is negative. Though plantation have Tax benefits from Budget, what benefit is thre if you don't make any profit? Many plantations shares are overvalued now. Be careful.
I CAN GO ON on many other Companies.
Banking and Finance , needs a dedicated post.
Early hint for investors. Watch/ buy shares when no one wants
NO TIME. THIS POST IF GETTING LONG.
Good luck to you. Wish me luck too